A "golden age" is on the horizon for natural gas across the globe, but only if the world's unconventional resources, including shale, tight gas and coalbed methane, are developed profitably and in an environmentally acceptable manner, the International Energy Agency (IEA) said in a sweeping report on Tuesday.
Upstream technology gave a big boost to unconventional gas operators in North America, "holding out the prospect of further increases in production there and the emergence of a large-scale unconventional gas industry in other parts of the world, where sizeable resources are known to exist," according to "Golden Rules for a Golden Age of Gas," the IEA's World Energy Outlook, which includes contributions by U.S. and Canadian government and industry officials.
"Yet a bright future for unconventional gas is far from assured: numerous hurdles need to be overcome, not least the social and environmental concerns associated with its extraction," said the authors. "Producing unconventional gas is an intensive industrial process, generally imposing a larger environmental footprint than conventional gas development. More wells are often needed and techniques such as hydraulic fracturing are usually required to boost the flow of gas from the well. The scale of development can have major implications for local communities, land use and water resources...Improperly addressed, these concerns threaten to curb, if not halt, the development of unconventional resources."
The technologies and know-how that meet the challenges exist for unconventional gas to be extracted, "but a continuous drive from governments and industry to improve performance is required if public confidence is to be maintained or earned." Among other things the IEA recommends that:
"Although there is a range of other factors that will affect the development of unconventional gas resources, varying between different countries, our judgment is that there is a critical link between the way that governments and industry respond to these social and environmental challenges and the prospects for unconventional gas production," said the authors.
The IEA suggests that operators, regulators and policymakers follow a set of "golden rules" to address environmental and social impacts because they may "maintain or earn the industry a 'social license to operate' within a given jurisdiction, paving the way for the widespread development of unconventional gas resources on a large scale, boosting overall gas supply and making the golden age of gas a reality." The rules "underline that full transparency, measuring and monitoring of environmental impacts and engagement with local communities are critical to addressing public concerns."
Applying the rules wouldn't be inconsequential to producers, according to IEA. The overall financial costs to develop a typical unconventional gas well would increase by about 7%, it said. "However, for a larger development project with multiple wells, additional investment in measures to mitigate environmental impacts may be offset by lower operating costs."
Assuming IEA's recommended rules became standard practice for developing unconventional gas reserves, the authors said global gas demand could jump by more than 50% between 2010 and 2035.
"The increase in demand for gas is equal to the growth coming from coal, oil and nuclear combined, and ahead of the growth in renewables. The share of gas in the global energy mix reaches 25% in 2035, overtaking coal to become the second-largest primary energy source after oil. Production of unconventional gas, primarily shale gas, more than triples in the 'Golden Rules Case' to 1.6 trillion cubic meters in 2035."
According to IEA, shale gas by 2035 would account for nearly two-thirds of incremental gas supply and the share of unconventional gas in total gas output would rise from 14% today to 35% by 2035. Most of the increase is expected after 2020, "reflecting the time needed for new producing countries to establish a commercial industry."
The United States would lead the world's producers over the projection period, ahead of Russia and China, "whose large unconventional resource base allows for very rapid growth in unconventional production starting toward 2020. There are also large increases in Australia, India, Canada and Indonesia. Unconventional gas production in the European Union, led by Poland, is sufficient after 2020 to offset continued decline in conventional output."
In their low unconventional gas case, the authors assumed that, primarily because of a lack of public acceptance, led by environmental concerns, only a "small" share of the unconventional gas resource base is accessible for development. "As a result, unconventional gas production in aggregate rises only slightly above current levels by 2035."